Citigroup Asset Management plans to launch a floating-rate closed-end fund. The firm is awaiting the Securities and Exchange Commission’s green light to roll out common shares of the Salomon Brothers Floating Rate Strategic Fund. Performance of most closed-end funds’ have been hit across the board but floating-rate funds have been an exception, trading at an average premium of 5.9%, according to Lipper. Eaton Vance Corp. and Nuveen Investments have been among the most prolific in raising new funds. A Citi spokeswoman, declined to comment citing pending regulatory approval.
Investors often favor closed-end corporate loan funds in a rising short-term interest rate environment, analysts said. These funds mostly invest in floating rate loans whose coupons reset every 30-40 days and as short-term rates continue to rise; these coupons will reset higher and generate more portfolio income, according to an August closed-end fund report from Smith Barney. Investors will benefit from higher dividends and solid returns, the report noted.